The financial crisis of 2008 taught many investors the concept of “liquidity risk.” Liquidity, in Wall Street jargon, is a measure of the ease with which something can be sold. Back in 2008, as asset prices plummeted, investors found that the banks that peddled stocks, bonds and even toxic waste were unwilling to buy them back. These banks broke their implicit agreement to make a market – that is, to always be available to buy and sell at a fair, market-clearing price. Investors were left holding the bag.
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